Local lawmakers override tax cut veto

LANSING — Both the Michigan House and Senate voted to override Governor Rick

Snyder’s veto of a bill to cut taxes on trade ins used during vehicle purchases Wednesday.

The vote will speed up, not eliminate, “sales tax on the difference.”

Under the reform, Michigan sales and use taxes would only be applied to the difference between the price of a new car and the value of a trade-in when fully implemented in 2029.

Sen. Mike Shirkey, R-Clarklake, voted for the over ride.

“Michigan is one of only six states — and the only Great Lakes state — to still tax the value of trade-ins. This is an unfair tax policy that penalizes Michigan families and puts businesses in the state at a competitive disadvantage,” he said.

The House vote means additional tax relief for people buying cars, trucks and SUVs with a trade-in.

Current law, approved in 2013, phases in credit for trade-ins — often referred to in several states as a “sales tax on the difference.”

With the vote, reductions will increase annually and be fully implemented by 2029, a decade earlier than the original 2039 date.

The credit now is $4,000 and would have risen by $500 annually until 2039. Then, there would have been no limit on the trade-in value excluded from taxation.

Under the vetoed law passed, the trade-in credit jumps to $5,000 in 2019 and increases by $1,000 each year after.

Sen. Shirley said, “To override the governor’s veto is serious, and my colleagues and I don’t take this action lightly. But even more concerning is this current tax policy, and we needed to act decisively to eliminate it.

State Rep. Eric Leutheuser also voted to accelerate tax relief.

“As Michigan’s comeback continues, we need to look for fiscally responsible ways to provide our residents with tax relief,” Leutheuser, of Hillsdale said. “Some years ago we joined the majority of states in addressing the amount of tax collected when trading in a vehicle. Now we can implement the full credit more quickly. It’s the right thing to do, and this is the right time to do it.”

The Senate bills overwhelmingly approved by the Legislature were originally vetoed by the governor in July of 2016. An override is rare, and the vote marks only the fourth override of a governor’s veto since 1951.

Gov. Snyder objected to the law because the loss of revenue would impact a number of programs and was not replaced.

The nonpartisan House Fiscal Agency said the state will lose an extra $2.1 million in the first fiscal year under the legislation and about $3 million more each year thereafter Most of the money goes into the fund that pays for K-12 schools.

The accelerated sales tax relief also will apply to boats and recreational vehicles purchased with a trade-in.